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FET ASSET TOUR
METROPOLITAN SYDNEY
TOUR BOOK - 28 APRIL 2015
1
CONTENTS
1. WELCOME
1
2. OAC OVERVIEW
2
3. SITE VISIT LOCATIONS
4
4. ASSET TOUR
5

CREMORNE

SEAFORTH

FAIRLIGHT

NORTH MANLY

BALMAIN (Time Permitting)
5. EARLY LEARNING MARKET
15
6. BOARD OF DIRECTORS
23
7. MANAGEMENT PROFILES
24
DIRECTORY
2
3
1. WELCOME
Nick Anagnostou
Chief Executive Officer
Folkestone Education Trust
AUSTRALIA’S ONLY LISTED
TRUST FULLY FOCUSSED
AND DEDICATED TO
INVESTING IN EARLY
LEARNING REAL ESTATE
Welcome to the Folkestone Education
Trust’s (FET) asset tour of selected
early learning centres in metropolitan
Sydney.
ASSET ACQUISITION,
MANAGEMENT & INVESTMENT
STRATEGY
The tour has been designed to provide
participants with an insight into FET’s
existing early learning centres, a brief
snapshot of its development pipeline,
as well as a first-hand look into the
operations of a small number of classleading early learning centres.
FET’s expertise revolves around the
acquisition,
development
and
management of early learning real
estate assets.
Understanding the
early learning market place, operators,
and the expectations of customers, is
critical to site and operator selection
and ultimately, returns.
Focusing predominantly in Sydney’s
north, the tour will highlight FET’s
strategy of investing on two fronts,
being quality early learning centres
and operators, as well as investing in
sites with strong, medium term
development potential with a focus on
vertical and typically medium density
residential development.
We are appreciative of Only About
Children, one of Australia’s leading
operators and also one of FET’s
strategic partners, in participating on
the tour and being available to provide
their insights into the early learning
sector.
The sites at Cremorne, Fairlight and
Seaforth are very good examples of
quality operating centres in locations
with very strong demand and high
barriers to entry. The North Manly and
Balmain development sites provide an
opportunity to understand the drivers
behind what FET believes are suitable
sites to redevelop for early learning
centres.
FET’S FOCUS
FET’s focus is on sites within a ~15 km
radius of Australia’s CBDs, rapidly
expanding
growth
areas
and
opportunistic purchases.
Today’s tour gives you access to some
of the leading centres in the country,
which should assist you to better
understand
the
operational
environment as well as how that
interacts with FET’s dual value
strategy of matching high performance
centres with high quality land holdings.
The development sites at North Manly
and Balmain are good examples of
sites that should provide strong returns
from both early learning activities as
well as the underlying land attributes,
providing investors with the benefits of
the development model, particularly
around transaction cost savings.
The second value driver of providing
returns through growth in underlying
land values fits well with Australia’s
continuing population growth and
increasing population densities. These
factors should add further support to
both demand for early learning as well
as the value of the underlying sites.
Thank you for joining the tour today.
We trust that it will give you an insight
into FET’s assets and the operations
of the early learning sector. On hand
today are many of FET’s management
team who are happy to answer any
questions you may have.
Nick Anagnostou
Chief Executive Officer
Folkestone Education Trust
1
2. OAC OVERVIEW
OAC OVERVIEW
Only About Children
TM
The centres we are visiting today are operated by Only About Children (Oac ).
We have invited Brendan McAssey, Oac’s CEO to join us on today’s tour.
With over a decade of experience in the early learning sector, running various
campuses under a number of different names, the company rebranded in 2012
as Only About Children (Oac). Oac now operates 28 early education and
preschool campuses for 0-5 year olds throughout Sydney and Melbourne,
offering 21st century early learning to meet the needs of today’s families.
Through a focus on innovation, development and passion for education, Oac
strives to be the world’s leading early learning provider.
Brendan McAssey
Founder & Chief Executive Officer
Brendan McAssey
Founder & Chief Executive Officer
Only About Children
Brendan McAssey entered the early learning sector in 2002, following a 20-year
career in investment banking, both in Australia and overseas.
As Founder and Chief Executive Officer of Oac, Brendan has grown the
business to include 28 long day care centres and three after school care
services across NSW and Victoria, with a further seven sites currently under
construction.
OAC CURRENTLY PROVIDES
CARE TO OVER 4,000
FAMILIES AND EMPLOYS
OVER 900 PEOPLE
Brendan holds a Bachelor of Economics and Masters in Accounting from
Flinders University.
2
TOUR OF EARLY
LEARNING CENTRES AT:
1. CREMORNE
2. SEAFORTH
3. FAIRLIGHT
4. NORTH MANLY
5. BALMAIN (Time Permitting)
3
3. SITE VISIT LOCATIONS
ITINERARY
Time
Location
8.15 am
Depart 60 Carrington Street, Sydney
9.00 am
15-19 Parraween Street, Cremorne
9.45 am
114-116 Frenchs Forest Road, Seaforth
10.45 am
87-95 Balgowlah Road, Fairlight
11.45 am
390-392 Pittwater Road, North Manly
12.30 pm
73-75 Beattie Street, Balmain*
1.30 pm
Arrival at 60 Carrington Street, Sydney
* Time permitting
4
2
2
NORTH MANLY
SEAFORTH
3
FAIRLIGHT
1
CREMORNE
BALMAIN
4
4. ASSET TOUR
CREMORNE, NSW
15-19 PARRAWEEN STREET, CREMORNE, NSW
The centre at Cremorne, a former 1970’s office building, was converted and refurbished in 2013 for use as a 120 place early
learning centre. The site is located adjacent to the Military Road retail and commercial precinct, within close proximity of
Mosman and Neutral Bay and is approximately 7.5 kilometres north east of the Sydney CBD.
KEY METRICS AS AT 31 MARCH 2015
General
Land Area (sqm)
880
Building Area (sqm)
1,574
Zoning
B4 Mixed Use
Construction/Refurbishment
2013
Max Long Day Care Places
120
Car Parking
19 spaces
Operator
Only About Children
Lease
Rent (PA) ($000)
618
Lease Type
Triple Net
Outgoings (%)
100
Annual Reviews (%)
CPI (min 3.00)
Lease Term (yrs)
15
Expiry
Dec 2028
Options (yrs)
10 + 10
Value Metrics
Purchase Date
Dec 2013
Purchase Price ($m)
8.07
Purchase Yield (%)
7.50
Last Valuation
Mar 2015
Current Value ($m)
8.40
Current Passing Yield (%)
7.36
Estimated Childcare Metrics
5
Daily Fees ($)
Approx. 145 - 172
No. Operating Days P.A.
255
Hours of Operation
7.30am - 6.00pm
Immediate Competition
OAC – CREMORNE
NEUTRAL BAY KINDERGARTEN
LITTLE SPROUTS CREMORNE
Cremorne Demographics
RHONDA’S COTTAGE
Population
11,048
Median Age
37 yrs
Percentage of 0-4 Years
Cremorne
6.5%
Percentage of 0-4 Years Australia
6.6%
Median Weekly Household
Income
(with children)
$1,846
Median Monthly Mortgage
Repayments
$1,733
Median Weekly Rent
$320
Source: ABS, 2011
KEY HIGHLIGHTS






NOTES
Premium inner metro location with thoroughfare type
access to Sydney CBD
Modern, converted long day care centre offering best of
breed facilities
Standard FET lease covenant to class-leading operator
Strong demand with high occupancy resulting in an
increase in licenced places to 120 places and 1 long
day care place for every 2.83 children
High barriers to entry – shortage of suitable sites
recognised by no development approvals for additional
early learning developments in the locality
High underlying land value and alternate use value of
improvements that can be readily converted back to
office or residential use
LOCATION & SURROUNDING DEVELOPMENTS



Located adjacent to Military Road, the main
thoroughfare through the affluent lower north shore
Military Road carries substantial commuter traffic from
the lower north shore and northern beaches to the CBD
of Sydney and North Sydney, therefore broadening the
potential catchment for this centre
Surrounding development comprises
low rise
apartments, medium density housing and detached
family homes together with the commercial hub of
Military Road
6
4. ASSET TOUR
SEAFORTH, NSW
114 FRENCHS FOREST ROAD, SEAFORTH, NSW
The centre at Seaforth comprises a modern split level, purpose built centre providing accommodation for 104 long day care
places. The centre boasts main road exposure, located on the corner of Clontarf Street and Frenchs Forest Road,
approximately 13 kilometres north east of the Sydney CBD.
KEY METRICS AS AT 31 MARCH 2015
General
Land Area (sqm)
1,461
Building Area (sqm)
716
Zoning
R2 Low Density
Residential
Construction/Refurbishment
2011
Interest
Freehold
Max Long Day Care Places
104
Car Parking
23 spaces
Operator
Only About Children
Lease
Rent (PA) ($000)
455
Outgoings (%)
100
Lease Type
Triple Net
Annual Review (%)
CPI (min 3.00)
Lease Term (yrs)
15
Expiry
Dec 2028
Options (yrs)
10 + 10
Value Metrics
Purchase Date
Dec 2013
Purchase Price ($m)
5.92
Purchase Yield (%)
7.50
Last Valuation
Mar 2015
Current Value ($m)
6.20
Current Passing Yield (%)
7.34
Estimated Operator Metrics
7
Daily Fees ($)
Approx. 125 - 158
No. Operating Days P.A.
255
Hours of Operation
7.30am to 6.00pm
Immediate Competition
JACARANDA CREATIVE PLAY CENTRE
Seaforth Demographics
OAC – SEAFORTH
PEACOCK STREET LONG DAY CARE
HARBOUR VIEW CHILDREN’S CENTRE
Population
6,726
Median Age
39 yrs
Percentage of 0-4 Years
Seaforth
8.0%
Percentage of 0-4 Years
Australia
Median Weekly Household
Income
(with children)
6.6%
$3,371
Median Monthly Mortgage
Repayments
$3,500
Median Weekly Rent
$550
Source: ABS, 2011
KEY HIGHLIGHTS







NOTES
High exposure location within a strong demographic
Quality, purpose built long day care centre completed in
2011
High quality early learning within the location is limited
Median monthly mortgage payments indicate a need for
dual incomes
Standard FET lease to class-leading operator
Recent increase in licenced places from 90 places to
104 places – representing strong demand
Currently no development approvals for additional early
learning development within the Seaforth locality
LOCATION & SURROUNDING DEVELOPMENTS





The site is located on the city bound side of the corner
of Frenchs Forest Road and Clontarf Street
Easy access to Wakehurst Parkway, a major arterial
between the northern beach suburbs, North Sydney
and the CBD
Surrounding development is a mix of detached housing,
together with more substantial homes particularly those
over- looking Middle Harbour
Bus service located within close proximity to the site
Limited opportunities to secure suitable sites in this
vicinity due to the highest and best use generally being
residential, including multi-unit style developments
8
4. ASSET TOUR
FAIRLIGHT, NSW
87-95 BALGOWLAH ROAD, FAIRLIGHT, NSW
The centre at Fairlight comprises a purpose built, two level early learning centre which is divided into 2 separate licensed areas.
The centre currently provides modern accommodation for a total of 164 long day care places. The centre is located opposite
Manly Golf Course and is within close proximity to the Manly West Primary School and Stockland Balgowlah.
KEY METRICS AS AT 31 MARCH 2015
General
Land Area (sqm)
3,225
Building Area (sqm)
1,325
Zoning
R1 General
Residential Zone
Construction/Refurbishment
2009
Interest
Leasehold
Max Long Day Care Places
164
Car Parking
33 spaces
Operator
Only About Children
Lease
Rent (PA) ($000)
713
Outgoings (%)
100
Lease Type
Triple Net
Annual Review (%)
CPI (min 3.00)
Lease Term (yrs)
44
Expiry
Jun 2057
Options (yrs)
Nil
Value Metrics
Purchase Date
Dec 2013
Purchase Price
8.6
Purchase Yield (%)
8.1
Last Valuation
Oct 2014
Current Value ($m)
8.6
Current Passing Yield (%)
8.3
Estimated Operator Metrics
9
Daily Fees ($)
Approx. 125 - 158
No. Operating Days P.A.
255
Hours of Operation
7.30am to 6.00pm
Immediate Competition
OAC – FAIRLIGHT
LEAPS & BOUNDS PRE-SCHOOL
PUNCHINELLO KINDERGARTEN
THE ROUNDHOUSE CCC
BALGOWLAH PRESCHOOL
Fairlight Demographics
THE LEARNING TREE
ROSEY POT KINDERGARTEN
Population
5,489
Median Age
37yrs
Percentage of 0-4 Years Fairlight
8.4%
Percentage of 0-4 Years Australia
6.6%
Median Weekly Household Income
(with children)
$3,311
Median Monthly Mortgage
Repayments
$3,000
Median Weekly Rent
$505
Source: ABS, 2011
KEY HIGHLIGHTS








NOTES
Sought-after location, approximately 15 kilometres from
the Sydney CBD
Modern long day care centre providing accommodation
for 164 long day care places
Long lease tenure with opportunity to freehold in the
future
Prime land holding of 3,225 sq.m. with strong long term
development potential in the absence of early learning
Median monthly mortgage payments indicate a need for
dual incomes
Standard FET lease to class-leading operator
Recent increase in licenced places from 149 places to
164 places confirming strong demand
High barriers to entry - currently no development
approvals for additional early learning development
within the Fairlight locality
LOCATION & SURROUNDING DEVELOPMENTS



Fairlight is located between Manly and Balgowlah
The site is located on the city bound side of Balgowlah
Road opposite the Manly Golf Club
Main CBD thoroughfare connection to Pittwater Road to
the north and Spit Road to the east
10
4. ASSET TOUR
NORTH MANLY, NSW
390-392 PITTWATER ROAD, NORTH MANLY, NSW
It is proposed to convert the existing improvements on the site for use as a long day care centre for 80 children. The building
will incorporate two activity rooms, one on each level with an open play scape area above the existing parking area and
additional parking for 18 cars. The proposed conversion will provide a modern contemporary finish.
KEY METRICS AS AT 31 MARCH 2015
General
EXISTING BUILDING
Land Area (sqm)
1,360
Proposed Gross Building Area
(sqm)
1,276
Zoning
Zone IN2 Light
Industrial
Expected Construction
Commencement
Oct 2015*
Expected Completion
May 2016
Interest
Freehold
Proposed Max Long Day Care
Places
80
Proposed Car Parking
16 spaces
Operator
Only About Children
* Subject to DA
Lease
ARTIST IMPRESSION
Rent (PA) ($000) on completion
348
Outgoings (%)
100 – Triple Net
Annual Review (%)
3.25 (First 10yrs)
3.00 (Second 10yrs &
options)
Lease Type
Triple Net
Lease Term (yrs)
20
Est. Lease Commencement
Jun 2016
Options (yrs)
10 + 10
Value Metrics
Purchase Date
Dec 2014
Purchase Yield (%)
7.4
Current Book Value ($m)
3.1
Expected Value on completion
($m)
4.7
Estimated Operator Metrics
11
Expected Daily Fees ($)
Approx. 130
Expected Hours Of Operations
7.30am to 6.00pm
Immediate Competition
BLUEY’S TREEHOUSE FRESHWATER PRESCHOOL
MILLERS HALL PRESCHOOL
SANDCASTLES CHILDCARE HARBORD
North Manly Demographics
OAC – NORTH MANLY
KID CITY KINDERGARDEN
LEAPS & BOUNDS PRESCHOOL
THE ROUNDHOUSE CHILD CARE CENTRE
OAC - FAIRLIGHT
Population
2,776
Median Age
38yrs
Percentage of 0-4 Years North
Manly
9.4%
Percentage of 0-4 Years Australia
6.6%
Median Weekly Household Income
(with children)
$3,045
Median Monthly Mortgage
Repayments
$3,467
Median Weekly Rent
$500
Source: ABS, 2011
KEY HIGHLIGHTS





NOTES
Corner site location with excellent exposure to Pittwater
Road. Expectation that the site will be a candidate for
re-zoning in the medium term to a mixed use type
zoning
The site is easily accessible within the suburb and enroute to the CBD
The catchment area extends beyond the population of
the suburbs of North Manly and Freshwater, indicating
a strong demand for early learning and an existing
shortage
Oac is proposing a new concept with pre-school places
only, a premium offering vastly different to the
Government Pre-schools
Currently no development approvals for additional early
learning development within the North Manly locality
LOCATION & SURROUNDING DEVELOPMENTS



Well known as the beach side suburb at the southern
end of Sydney's northern beaches
High exposure corner site, with substantial passing
traffic
Surrounding development is larger format retail outlets
along the northern side of Pittwater Road, with the
Manly Lagoon and surrounding parkland within close
proximity
12
4. ASSET TOUR
BALMAIN, NSW
73-79 BEATTIE STREET, BALMAIN, NSW
It is proposed to convert the existing warehouses for use as a long day care centre for 90 children. Three distinct floor levels
will be provided to incorporate indoor and outdoor play areas. The outdoor play areas will be predominantly enclosed to
characterise an indoor/outdoor play environment.
KEY METRICS AS AT 31 MARCH 2015
General
ARTIST IMPRESSION
Land Area (sqm)
963
Proposed Gross Building Area
(sqm)
1,101
Zoning
R1 General
Residential
Expected Construction
Commencement
Nov 2016*
Expected Completion
Aug 2016
Interest
Freehold
Proposed Max Long Day Care
Places
90
Proposed Car Parking
23 Spaces
Operator
Only About Children
* Subject to DA
Lease
Rent (PA) ($000)
450
Outgoings (%)
100
Annual Review (%)
3.25 (First 10yrs)
3.00 (Second 10yrs &
options)
Lease Type
Triple Net
Lease Term (yrs)
20
Est Lease Commencement
Sept 2016
Options (yrs)
10 + 10
Value Metrics
Purchase Date
Jun 2014
Purchase Yield (%)
7.65
Current Book Value ($m)
4.7
Expected Value on
Completion ($m)
6.0
Estimated Operator Metrics
13
Expected Daily Fees ($)
Approx. 125 - 150
Expected Hours of Operation
7.30am – 6.00pm
Immediate Competition
JOHN MCMAHON CHILD CARE CENTRE
OAC – BALMAIN
BALMAIN CARE FOR KIDS
Balmain Demographics
BALMAIN COVE EARLY LEARNING CENTRE
BALMAIN CHILDREN’S CENTRE
BALMAIN CARE FOR KIDS
Population
14,752
Median Age
39yrs
Percentage of 0-4 Years Balmain
7.0%
Percentage of 0-4 Years Australia
6.6%
Median Weekly Household Income
(with children)
$3,643
Median Monthly Mortgage
Repayments
$3,121
Median Weekly Rent
$500
Source: ABS, 2011
KEY HIGHLIGHTS







NOTES
High population density inner-west suburb
Proposed development is high quality, retaining the
current warehouse features to facilitate a unique and
character filled space
Median monthly mortgage payments indicate a need for
dual incomes
Strong lease covenant to class leading tenant
Statistics show strong demand with approximately 1
long day care place for every 2.5 children
Currently no development approvals for additional early
learning development within the Balmain locality
Limited sites of this nature available in Balmain, and as
such there is little additional competition
LOCATION & SURROUNDING DEVELOPMENTS




Located approximately 4 kilometres from Sydney CBD
The site is located near the roundabout of Mullens and
Beattie Street, allowing easy vehicle access to Darling
Harbour and the CBD via the Western Distributor
Beattie Street is within short walking distance to the
popular Darling Street retail precinct and public
transport
Surrounding development is typical of the Balmain
Penninsula, comprising a mixture of single and double
story terrace houses, predominately utilised as
residences, with a smattering of commercial premises
within the locality, including the nearby Exchange Hotel
14
5. EARLY LEARNING MARKET
GROWTH FORECASTS
EARLY LEARNING GROWTH FORECASTS: 2013-2019
THE EARLY LEARNING
SECTOR IS PROJECTED TO
GENERATE REVENUE OF
$9.6 BILLION TO 2018-19,
INCLUDING FORECAST
REVENUE GROWTH OF
4.2% ANNUALISED

Department of Employment forecasts show the early learning sector as one
of Australia’s key sources of employment growth

Forecast growth in ‘Social Assistance’ employment of 229,400 jobs over the
5 year forecast period

39% higher growth forecast for Social Assistance than any other industry

This is on the back of record demand for approved childcare in the 0-12 year
category

Staff retention difficult due to relatively low wage rates

Growth supported by the mini baby boom, continued government support
and increasing costs of living placing pressure on females to return to the
workforce
EMPLOYMENT GROWTH: 2013/2014 – 2018-2019
Accommodation and Food Services
25.0%
Administrative and Support Services
Agriculture, Forestry and Fishing
20.0%
Arts and Recreation Services
Health Care and Social
Assistance (incl. Child
Care)
15.0%
Construction
Education and Training
Electricity, Gas, Water and Waste Services
Financial and Insurance Services
10.0%
(%)
Health Care and Social Assistance (incl. Child
Care)
Information Media and Telecommunications
5.0%
Manufacturing
Mining
0.0%
Other Services
Professional, Scientific and Technical Services
Public Administration and Safety
-5.0%
Rental, Hiring and Real Estate Services
Retail Trade
-10.0%
-100.0
-50.0
0.0
50.0
100.0
(000s)
Source: Department of Education
15
150.0
200.0
250.0
300.0
Transport, Postal and Warehousing
Wholesale Trade
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
NUMBER OF PEOPLE AGED 0-4 YRS INCREASING

Over 1.53 million (or 6.5% of the total population) aged between 0-4 years

17% increase in the number of children in 0-4 over the past 10 years

Driven by both strong population growth and substantially higher birth rates

Substantial growth in birth rates since 2004

Flowing through to increased demand for early learning services and strong
take-up rates within existing centres
SUBSTANTIAL GROWTH IN
BIRTH RATES SINCE 2004
POPULATION 0-4 YEARS: 1971 - 2014
1.6
Number of people (0-4 years)
% of total population
1.5
10.0%
9.5%
9.0%
Millions
1.4
8.5%
1.3
8.0%
7.5%
1.2
7.0%
1.1
6.5%
1.0
6.0%
71 74 77 80 83 86 89 92 95 98 01 04 07 10 13
(Year)
Source: ABS
BIRTH RATES
AUSTRALIAN BIRTH RATES BY YEAR: 2003 – 2013
320,000
310,000
300,000
290,000
280,000
270,000
260,000
250,000
240,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: ABS
16
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
MIGRATION
GROWTH SUPPORTED BY
THE MINI BABY BOOM,
HIGH MIGRATION LEVELS
CONTINUED GOVERNMENT
SUPPORT AND
INCREASING COSTS OF
LIVING PLACING
PRESSURE ON FEMALES
TO RETURN TO THE
WORKFORCE

Australia has an average migration level of over 1.7% p.a., placing it at the
1
top of OECD on a percentage basis

Major migration places VIC, NSW, QLD and WA as the states which are
most likely to be influenced by net immigration inflows over the next few
years

Average age of migrants to Australia is 26 years which is expected to have a
positive impact on birth rates over the next decade

FET’s development pipeline takes into account these trends in assessing
new development opportunities
POPULATION GROWTH
MIGRATION SUPPORTING POPULATION GROWTH: 2013 - 2014
80,000
70,000
No. of people
60,000
50,000
40,000
30,000
20,000
10,000
0
-10,000
NSW
VIC
QLD
SA
Net Overseas Migration (NOM)
WA
TAS
NT
ACT
Net Interstate Migration (NIM)
Net migration
Source: ABS
1
OECD – Organisation for Economic Co-Operation & Development
FEMALE WORKFORCE PARTICIPATION

Rise in workforce participation rate of women with dependent children has a
positive affect on early learning, although growth rate in female participation
rate has slowed
FEMALE WORKFORCE PARTICIPATION: 1990 - 2014
59.0
% of female population
58.0
57.0
56.0
55.0
54.0
53.0
52.0
51.0
90
Source: ABS
17
92
94
96
98
00
02
04
06
08
10
12
14
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
PROPERTY YIELDS

Yield compression accelerated in H1 2015, after a strong FY14

Recent sales in H2 2015 demonstrate that this trend will likely continue.
Sale yields in NSW and VIC remain strong with evidence of QLD yields
continuing to strengthen, albeit from a lower base

Continued investor interest in the sector attracted to the long lease terms,
considered tenant strength and federal government support

Demand for early learning has remained strong with needs greatly
outstripping supply in some metropolitan locations, resulting in the
increase of rentals
QUALITY REAL ESTATE
THAT PROVIDES A
PREDICTABLE INCOME
STREAM, WITH THE
POTENTIAL FOR CAPITAL
GROWTH
CHILDCARE CENTRE SALES YIELDS: 2010 - 2015
15.0%
13.0%
Yield
11.0%
9.0%
7.0%
5.0%
3.0%
2010
2011
2012
2013
2014
Date
Linear (Metro Yields)
Linear (Regional Yields)
Source: Folkestone Asset Management
HISTORICAL PROPERTY YIELDS BY STATE: 2012 – 2014
10.00%
9.50%
Yield
9.00%
8.50%
8.00%
7.50%
7.00%
Jun-12
Dec-12
VIC
Jun-13
NSW
Dec-13
Jun-14
Dec-14
QLD
Source: Folkestone Asset Management
18
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
LONG DAY CARE CENTRES
AN ADDITIONAL 50,000 LDC
PLACES NEEDED TO
ACCOMMODATE
POPULATION GROWTH BY
2026

The number of approved early learning services increased by 4.9 per cent
(753 services) since the March quarter 2013

The Productivity Commission projected that an additional 50,000 Long Day
Care (LDC) (full-time) places will be needed to accommodate the population
growth in children and the subsequent demand for childcare – assuming 90
places per centre – that is an additional 555 new centres
NUMBER OF LDC CENTRES
6,500
6,400
Centres
6,300
6,200
6,100
6,000
5,900
Dec-11 Mar-12
Jun-12 Sep-12 Dec-12 Mar-13
Jun-13 Sep-13 Dec-13 Mar-14
Source: Department of Social Services
LONG DAY CARE OPERATORS

While overall market concentration is low, it is possible that clustering of
ownership within a given local area may result in local market concentration
being high

The majority of long day care centres (54%) are independent centres that
are not part of a network or group of services. A further 25 per cent of all
centres are operated as part of a network of less than 10 centres

Goodstart Early Learning is the largest market participant
1
CONCENTRATION IN THE ECEC MARKET
Goodstart operated
647 services
3,466 providers
operated 1 service
566 providers
operated 2 to <10
services
1
G8 Education
operated 127
services
8 providers
operated 20 to <50
services
26 providers
operated 10 to <20
services
ECEC – Early Childcare Education & Care
Source: Productivity Commission calculations based on Department of Education administrative data (2012-13)
19
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
LONG DAY CARE CENTRE OPERATING HOURS

The majority of centre-based services are available from 6-7am in the
morning through to 6-7pm in the evening

Approximately 70% of LDC places operate for at least 11 hours per day

25% of LDC services opened at 6.30am, and 68% opened between 6.307.30am

72% of services closed between 6.00-6.30pm
PROXIMITY TO HOME IS
PRIMARY REASON FOR
CHOOSING A CENTRE
OPERATING HOURS OF CENTRE-BASED CARE SERVICES
per cent of services
100
80
60
40
20
0
Before and after school care
Vacation care
Occasional care
Long day care
Preschool
Source: Productivity Commission calculations from ACECQA administrative data (20 January 2014)
LONG DAY CARE CENTRE TRAVEL

Proximity to home is the primary reason for choice of a particular centre,
followed by quality of care and education, and the availability of places

Two-thirds of Australian children that used an approved ECEC service
attended a service within five kilometres of their home
1
REASONS FOR CHOOSING THE LONG DAY CARE CENTRE
Close to school child will attend
Close to sibling's school
On the way to own work
Cost
Sibling attends/attended
Hours
Close to work
Availability
Quality education
Quality care
Close to home
Per cent of children
0
10
20
30
40
50
1
Children may attend the particular LDC centre for more than one reason
Source: Productivity Commission calculations based on ABS (2009c)
20
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
GOVERNMENT EXPENDITURE ON CHILDCARE
80% INCREASE IN
GOVERNMENT
EXPENDITURE ON EARLY
CHILDCARE EDUCATION
AND CARE (ECEC)
BETWEEN 2008 – 2013

In 2014-15 total government expenditure on ECEC is expected to exceed
$8 billion

Much of the recent increase in expenditure was associated with the Child
Care Tax Rebate (CCTR), which later became the Child Care Rebate (CCR)

Government expenditure on ECEC increased 80%, or $3 billion in real
terms, between 2008-09 and 2012-13 (when the CCTR was increased to
50% of out-of-pocket costs up to a maximum of $7,500 per child per year)
1
GOVERNMENT EXPENDITURE ON ECEC
7000
Real (2012-12) expenditure1,2
6000
CCTR increased to 50%
up to $7500 per child per year
CCTR introduced
$ million
5000
CCB introduced
4000
Total
3000
2000
Australian Government
1000
State and Territory governments
0
Year
1996-97
1998-99
2000-01
2002-03
2004-05
2006-07
2008-09
2010-11
2012-13
1.
Includes recurrent and net capital expenditure
Expenditure adjusted to 2012 13 dollars using the General Government Final Consumption Expenditure chain price
deflator
Source: SCRGSP (2014) and various SCRGSP Reports on Government Services
2.
GOVERNMENT SUBSIDY OF CHILDCARE

The vast majority of families received subsidies of between 50% and 90% of
their childcare fees in 2011-12

Low income families eligible for the maximum rate of Child Care Benefit
(CCB) receive the highest subsidy levels

Higher income families also tend to rely on CCR rather than CCB as their
main subsidy source
700
60
600
50
$ million
500
40
400
30
300
20
200
10
100
240000+
220-240000
200-220000
180-200000
160-180000
140-160000
120-140000
100-120000
90-100000
80-90000
70-80000
60-70000
50-60000
40-50000
30-40000
0
20-30000
0
Annual family disposable income ($)
CCB
1
CCR
JETCCFA
% paid by families (RHS)
ECEC – Early Childcare Education & Care
Source: Productivity Commission calculations based on Department of Education administrative data (2011-12)
21
per cent of fees
SUBSIDY AMOUNTS BY INCOME
5. EARLY LEARNING MARKET
SECTOR OUTLOOK
2
GLOBAL COMPARISON - OUT-OF-POCKET COSTS

OECD data suggests that out-of-pocket early learning costs as a per cent of average earnings are slightly higher in
Australia than the OECD average

For single parent families, US, NZ and Canada have higher out of pocket costs

For partnered families, Australia has lower out of pocket costs than UK, US, NZ and Canada
1
OUT-OF-POCKET COSTS AS A PER CENT OF AVERAGE WAGE, 2012
Single Parent Family
Partnered Family
Ireland
United Kingdom
United States
Ireland
Japan
Switzerland
Finland
United States
New Zealand
New Zealand
Canada
Canada
Norway
Netherlands
Netherlands
Australia
Australia
Japan
OECD Average
Finland
Switzerland
OECD Average
Germany
France
United Kingdom
Norway
Spain
Denmark
France
Germany
Denmark
Spain
Sweden
Portugal
Portugal
Sweden
0
10
20
30
40
50
Per
centwage
of average wage
Per cent of
average
0
10
20
30
40
50
Per cent of average wage
Per cent of average wage
1.
OECD – Organisation for Economic Co-Operation and Development
Assumes the parent is earning 100% of the average wage. Assumes two children: one aged two and one aged three. The out–of–pocket cost of centre based childcare (or net cost
of childcare) is calculated as the difference in ‘family net income’ of a family who uses centre based childcare and an otherwise identical family who does not use such childcare.
‘Family net income’ is the sum of gross earnings plus cash benefits minus taxes and social contributions. This methodology takes into account childcare specific supports designed
to reduce the cost faced by parents as well as the interaction between childcare specific policies and other tax and benefit policies. All fee reductions, including free pre–school or
childcare for certain age‑groups, are shown as rebates where possible. In–work incomes do not include any time limited benefits paid on taking up employment
Source: OECD (2014)
2.
22
6. BOARD OF DIRECTORS
A BOARD OF DIRECTORS
WITH YEARS OF PROVEN
EXPERTISE IN REAL
ESTATE, BANKING AND
FINANCE, FINANCIAL
PLANNING AND
INVESTMENT MANAGEMENT
A BROAD AND MULTIDIMENSIONAL APPROACH,
TOGETHER WITH
SIGNIFICANT INVESTMENT
EXPERIENCE, ENSURES THE
BOARD HAS THE
NECESSARY SKILLS IN
MITIGATING RISK AND
PROTECTING CAPITAL
23
NICK ANAGNOSTOU
Executive Director &
Chief Executive Officer
VIC COTTREN
Chairman & Non-Executive Director
Nick is CEO of Folkestone’s
Social Infrastructure Funds business
across two funds and approximately
$700 million. Nick is the Fund
Manager and executive board
member for FET and Fund Manager
for the Folkestone CIB Fund. Nick has
25 years of experience in the
Australian commercial property and
Funds Management industries. Nick
holds a Bachelor of Business in
Property and is an Associate of the
Australian Property Institute and
Finsia.
Vic has over 50 years industry
experience, extensive background in
share broking, financial planning, life
insurance, superannuation and
investment management gained with
AMP, Australian Eagle Insurance
Company, Norwich Union, The Investors
Life Group and National Australia Bank.
He held various senior posts including
Chief Executive and Director within
these companies and their subsidiaries.
Since 1995, Vic has worked as a
consultant to financial service companies
in relation to investment, superannuation
and financial planning.
MICHAEL JOHNSTONE
Non-Executive Director
GRANT HODGETTS
Non-Executive Director
Michael has over 40 years of global
business experience in Chief
Executive and General Management
roles and more recently in non
executive Directorships. He has lived
and worked in overseas locations
including the USA, has been involved
in a range of industries and has
specialized in corporate and property
finance and investment, property
development and funds management.
His career has included lengthy
periods in corporate roles including 10
years as one of the Global General
Managers of the National Australia
Bank Group.
Grant has over 30 years of industry
experience. He is currently NonExecutive Chairman of Folkestone
Funds Management, Principal of
Hodgetts and Partners and a consultant
to the Asian Association of Investors in
Non Listed Real Estate (ANREV). He
has held various positions within the
Investment and Funds Management
Division of Mirvac Limited including that
of CEO Australia for Mirvac Investment
Management. Prior to joining Mirvac, he
was Head of Property in the
Specialised Capital Group of Westpac
Institutional Bank.
7. MANAGEMENT PROFILES
NICK ANAGNOSTOU
Chief Executive Officer
TRAVIS BUTCHER
Chief Financial Officer
CRAIG BLAKE
Investment Manager
NATALIE LYNCH
Senior Asset Manager
Fund Manager of FET
since 2006. Nick has over
25 years’ experience in the
Australian commercial
property and funds
management industries.
Previously a Director at
Jones Lang LaSalle.
CFO of FET since 2008.
Travis has over 15 years’
financial experience in
Australia and overseas.
Previously with
PricewaterhouseCoopers
specialising in transaction
services and audit.
Joined Folkestone in
September 2014. Craig has
extensive experience
investment, leasing and
capital management in the
property industry. Previously
a Director at BlackRock
Investment Management and
Jones Lang LaSalle.
Senior Asset Manager of
FET since 2006. Natalie
has over 20 years’
experience in property and
project management and is
a qualified interior designer.
Previously the national
asset manager at
Fernwood.
KRISTINE CHASEMORE
Senior Asset Manager
WENDY MACAFEE
Senior Asset Manager
CARLA STEVENS
Asset Manager
LACHLAN ATKINS
Asset Manager
Senior Asset Manager of
FET since 2006. Kristine’s
experience is in property
management, tenant and
landlord representation.
Previously with Jones Lang
LaSalle.
Joined Folkestone in
September 2014. Wendy is a
registered architect. Previously
held key development and fund
positions at Cbus, Becton and
Telstra Super.
Asset Manager of FET since
2011. Carla’s experience is in
valuations, property and
project management.
Previously with Hay Property
Consultants.
Joined Folkestone in
October 2014. Lachlan is a
qualified property valuer
with broad experience in
specialised asset classes,
most recently with Ernst &
Young.
FOLKESTONE MANAGEMENT HAVE 53
YEARS OF COLLECTIVE EXPERIENCE IN
THE EARLY LEARNING REAL ESTATE
SECTOR ACROSS MULTIPLE DISCIPLINES
MARK STEWIEN
General Counsel
LULA LIOSSI
Investor Relations Manager
General Counsel of FET
since 2009. Over 15 years’
experience in corporate
and real estate law in
Australia and overseas.
Previously the Fund
Manager of FST and Senior
Associate at Baker &
McKenzie.
Investor Relations Manager
of FET since 2007. Over 25
years’ experience in investor
and public relations.
Previously with KPMG
Corporate Finance and
Norwood in Australia, UK
and USA.
24
RESPONSIBLE ENTITY AND
PRINCIPAL PLACE OF
BUSINESS OF THE TRUST
Folkestone Investment
Management Limited
Level 12
15 William Street
Melbourne VIC 3000
DIRECTORS OF THE
RESPONSIBLE ENTITY
Victor David Cottren (Chairman)
Michael Francis Johnstone
Nicholas James Anagnostou
Grant Bartley Hodgetts
SOLICITORS
Clayton Utz
Level 15
1 Bligh Street
Sydney NSW 2000
UNIT REGISTRY
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
T: 1300 737 760
AUDITORS/TAXATION
ADVISORS
PricewaterhouseCoopers
Freshwater Place
2 Southbank Boulevard
Southbank VIC 3000
BANK
National Australia Bank Limited
500 Bourke Street
Melbourne VIC 3000
Australia & New Zealand Banking
Group Limited
Level 29
100 Queen Street
Melbourne VIC 3000
CUSTODIAN
The Trust Company (Australia)
Limited Level 15, 20 Bond Street
Sydney NSW 2000
SECRETARY
Scott Martin
Level 12, 15 William Street
Melbourne VIC 3000
INVESTOR RELATIONS
Lula Liossi
Level 12, 15 William Street
Melbourne VIC 3000
T: +61 3 8601 2668
25